Lenovo income takes a hit as PC market slumps

Overall revenues down 14% year-on-year

Lenovo's revenues suffered a heavy hit in its 2023 full-year earnings as a result of the PC market slump, with Q4 figures sinking to mark its third consecutive quarterly fall.

The group's overall revenue came to $62 billion, down 14% from $71 billion in 2022.

While net income came in at $1.6 billion, down from $2 billion, representing a drop of 21%.

The American-Chinese tech giant said its intelligent devices group (IDG) business saw a 21% setback in revenue due to sector inventory digestion, demand slowdown and exchange rate fluctuations.

IDG revenue dropped from $62 billion to $49 billion in 2023.

Despite the IDG results, Lenovo said profitability was stable, with gross margin and operating margin both delivering "18-year highs".

Revenue from non-PC businesses reached a fiscal year high of nearly 40%, fuelled by Lenovo's diversified growth engines of solutions and services group (SSG) and infrastructure solutions group (ISG) growing revenue to $6.7 billion and $9.8 billion, respectively, up 22% and 37% year-on-year (YoY).

After a year of industry and global uncertainties, Lenovo claims it's seeing positive signs of the market stabilising.

The vendor expects the entire PC and smart devices market to resume year-to-year growth in the second half of 2023, and for the IT services market to resume relatively high growth - together Lenovo claims these will drive the total IT market in 2023 back to moderate growth.

Lenovo said its cash position "remained strong", and its cash conversion cycle has "further improved".

The company continued to invest in R&D around "New IT" (client, edge, cloud, network and intelligence) to build its future core competencies.

During the last year, in fact, Lenovo increased its full year investment in R&D to $2.2 billion, up 6% year-to-year.

In Q4, Lenovo recognised a one-time restructuring and other charges of $249m, among various other actions, to deliver around $850m of annual run-rate group expense savings, helping to establish a solid foundation for the company's operations in a challenging market, and position it for future growth.

However, Lenovo closed the quarter with revenue of $12.6 billion, down 24% year-to-year.

Revenue from IDG declined 33% year-to-year, with momentum from the growth engines of SSG and ISG somewhat offsetting the device market softness.

SSG revenue was up 18% YoY to $1.6 billion, and ISG revenue was up 56% to $2.2 billion. Non-PC revenue mix during the quarter reached what Lenovo calls a "historic high" of 43%, up 12 points YoY.

"Lenovo has delivered stable profitability in the last fiscal year as our diversified growth engines continue to hit new milestones," said Lenovo chairman and CEO Yuanqing Yang.

"Their momentum is driving steady progress in our services-led transformation, and our non-PC businesses' revenue mix increased to nearly 40%.

"Our clear strategy is working, and our operation is resilient, even in the face of global uncertainties.

"Going forward, we will continue to invest in R&D to capture the next wave of growth opportunities, so we are well prepared for the future."

This article was first published on CRN UK